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what leaders need to know about D,E&I


Leadership Insights

by Naeema Sajid.


In a series of articles, we discuss topical issues facing industry leaders, all through the lens of diversity, equity and inclusion (D, E & I).


In the first of our series, and with many D, E & I enthusiasts struggling to make the case to invest in workplace projects, we discuss what HR professionals and business leaders need to know about D, E & I to help make the case for change.


D, E & I: Why bother? What are the benefits? And why should we care? Just a few of the questions many want to ask but are frightened to. Here are some of my answers:


1. The numbers don’t lie: Diverse workforces make businesses more money


Maintaining a diverse workforce has become imperative for modern organisations to

succeed. Companies with diverse staff are better positioned to meet the needs of diverse clients, changing social demands and unpredictable market trends.

Naeema Sajid of Diversity+
Naeema Sajid. Director, Diversity+

Research from McKinsey shows that over a several-year timeframe, racially diverse companies are 35% more likely to outperform their less diverse counterparts, while from a gender standpoint, companies with strong female representation are 25% more likely to outperform.


Further, research by Harvard Business Review shows that diverse companies are 70% more likely to capture new markets than organisations that do not actively recruit and support talent from under-represented groups.

According to the McKinsey study “Why Diversity Matters”, companies in the top quartile for gender-diverse executive suites are 15% more likely to generate above-average profitability compared to the bottom quartile of companies, whose leadership or executive teams were predominantly white and male. When it comes to staffing, companies that have a higher degree of racially and ethnically diverse employees have a clear advantage over companies relying on a "culture fit" that tends to trend white and monocultural.


And if that wasn't enough, the McKinsey study also found that companies with gender-diverse executive teams in the highest quartile outperformed male-dominated companies by 21% in terms of EBIT (earnings before interest and taxes) and 27% in terms of creating long-term value, which is particularly important during times of economic instability.


Racially diverse executive teams provided an advantage of 35% higher EBIT and 33% more long-term value creation over the least racially diverse companies. Subsequently, companies with diverse talent and executives are more likely to retain the best talent and engage in progressive decision-making attracting a larger variety of clients.


2. Embracing D, E & I supports innovation


A recent global study by the Boston Consulting Group (BCG) found that offering education and training that underrepresented groups may not have had access to in the past can further foster innovation by exposing employees to new skills and ideas. My parents mantra of 'Education, Education, Education' is seldom wrong.


More recent research by Forbes, suggest companies with greater than 30% female representation in management and executive leadership roles, outperform their peers, with one industry leader observing, ”Afterall, women, particularly Black women, have long juggled multiple priorities inside and outside the workplace, developing sharp instincts and formidable skills that translate into (successful) business results”. This shouldn't come as a surprise but now we have the figures to prove it.


3. D, E & I is proving to be better for our economy and our health


What about the UK? All of the above research has been conducted on a global level and the figures include analysis of UK companies. However, Censuswide on behalf of Perkbox carried out research in June 2022. It surveyed 508 workplace managers and leaders in the UK. It found 42% of businesses reported an increase in productivity due to improved D, E & I policies. A quarter (25%) of those who have taken action have seen a direct correlation between improved policies and increased revenue. The research also revealed that 33% of teams are noticeably happier due to improved D E & I policies, 32% of teams became more creative and innovative, and 31% are finding it easier to attract new talent.


Despite all of this, the research found that a fifth (17%) of businesses still don’t think it was necessary to improve diversity, equity and inclusion in the workplace. The research revealed that reluctance to make improvement stemmed from fundamental barriers, including concerns around employee privacy, skills shortages and budget constraints:

  • 32% of businesses want to respect their employees' privacy and understand they may not wish to share aspects of their personal lives. With personal data being such a valuable tool in both identifying and removing D, E & I barriers, this is a stumbling block many businesses find difficult to overcome, and yet it is an essential tool to better plan and execute an effective D, E & I strategy.

  • 22% have access to a limited talent pool and are under pressure to hire fast. With leadership teams themselves lacking diversity, this perpetual cycle becomes increasingly difficult to break.

  • 20% claim not to have the budget to hire external consultants to support them to improve D, E &I, leaving their HR personnel with increasing pressures and workloads. Add to this the effects of the pandemic and its stressful aftermath on HR personnel, HR managers are facing their own ‘great resignation’ leading to companies finding HR talent hard to recruit and retain.


A view across Edinburgh, home of Diversity+

4. The Scottish dimension: How do we compare?


Scotland has a slightly lower percentage of women-led businesses (15.4%) as compared to the U.K. average (16.8%).The figure is also lower in terms of ethnic minority led businesses. In 2020, ethnic minority led businesses were most common in England, with 6% of SMEs being based there, compared to 2% in Scotland.


On a positive, Scotland is not closed off to global trends, with Scottish businesses recognising the need to keep pace. According to a recent survey by Bank of Scotland, half of businesses in Scotland plan to introduce new policies and training to improve inclusivity in the workplace – and more than a quarter plan to act in the next six months. The survey found that Scottish business confidence climbed in nine of the twelve UK regions and nations, with the biggest rises in Wales, Scotland and London.


The survey was carried out in February of this year as part of the monthly Lloyds Bank Business Barometer. It surveyed 1,200 UK companies - including 100 businesses in Scotland - from all industry sectors, regions and firm sizes with annual turnover above £250,000. It found:

  • 31% of businesses plan to prioritise training their staff on diversity and inclusion to build a more inclusive working environment.

  • 27% intend to have a more diverse team of employees and a fifth want to adopt more flexible working arrangements.

  • 30% said they need access to specialist HR skills

  • 23% said financial incentives from government would help with their progress towards building a more inclusive workforce.

  • 22% cited legislation from government as essential to help them move forward.

The research also found that for many businesses, delivering their plans will require external support and guidance.


In conclusion all the research finds that Diversity + Equity + Inclusion = Profitability, Sustainability and Well-being. The case is well made.


What can leaders do?


Many of the issues surrounding lack of or poorly designed D, E & I strategies, stem from a leadership level of failure: by refusing to properly plan, create and fully support diversity and inclusion initiatives. Introducing an initiative as a result of a knee jerk reaction seldom works and will fail to attract long term employee engagement. Disengaged employees who don’t feel ‘seen’ and valued are not only more likely to quit, but they will also do the bare minimum while in their role, HR personnel included. So, what can leaders do? Here are a few basics:


1. Data is king: Gain it, Grow it and Share it


You’ve heard it all before, “you can’t treasure what you can’t measure”, “errors using inadequate data are much less than those using no data at all”, “without data you're just another person with an opinion”.


With an increased demand for diversity data from all stakeholders, against the backdrop of reluctance to share private information, we need to strip back to basic social workplace needs. This starts with getting to know your people and building trust and loyalty.

Naeema Sajid in a family scene

From a very young age, listening to family members who ran businesses and later working in those businesses myself, I learned the first lesson of business: value your most important asset; your people. Get to know them, work alongside them, cry with them, laugh with them, direct and guide them, share success and failure with them. This includes your HR talent, often overlooked as seen to be the ‘fixers’. Yet, in the corporate world this basic principle is often overlooked or altogether lost, with leadership teams completely out of touch with those on the ground.


Learning and development people talent can take organisations and entire industries to new heights. The responsibility starts from the very top. Leaders need to know their people to better invest in them. Equally, the failure to understand can lead to business declines and failure, with attracting and retaining quality employees being the front-line casualty.


2. Invest in Inclusion: benefit through Innovation


For a D, E & I strategy to work, inclusion is key. If missing, you can’t unlock the talent. Embedding inclusive practices and values at all levels, including leadership, leads to positive long term change, the results of which ripple across an organisation and the industry in general. Inclusive companies are more innovative and more likely to achieve long-term growth as an entity and industry wide.


Attracting diverse talent, in any form, is not enough in and of itself. Diverse employees will feel unappreciated and disengaged if they feel on the one hand tokenised whilst on the other excluded from workplace practises and held back from making contributions and performing as well as they could. Businesses that meaningfully execute inclusion strategies foster more innovation and loyalty than those that only strive for diversity from an optic or statistical level.


A lack of relatable role models and mentors is a frequent roadblock, particularly for women and minority groups. Providing support and learning that is tailored to your talent's needs can alleviate disparities. Industries that are facing notorious difficulties in recruitment and retention of diverse talent, such as the financial and legal sector, must take extra steps to create learning, mentorship, and professional opportunities that are specifically tailored to underrepresented groups. This will not only help to bridge inequalities, it will enable more innovation.


With millennials and Gen-Z becoming the dominant and much sought-after generation in the workforce, when attracting young talent organisations must consider their inclusion track record and ranking. Millennials and Gen-Z are not only the most diverse generation in history; they are also the most aware and educated in terms of diversity and inclusion. They are strong in their beliefs, and not scared to voice them. The vast majority believe that workplaces with a more diverse and inclusive workforce, will more readily embrace innovation, as a result of which, they will have more to offer them in terms of opportunity and career progression. They are not easily fooled by standardised diversity policies or statements. They want to see action and results, and in the age of ‘likes and reviews’ failure to produce will not only prevent talent coming through the door, existing talent will want to leave.


3. Give your people what they want: A workplace where they can thrive


The most recent (June 2022) CIPD Good Work Index shows the importance of considering job quality and satisfaction, noting that pay is no longer a ‘silver bullet’ for keeping staff.


Research from the professional body for HR and people development, found that more than 6.5 million people in the UK expect to quit their job in the next 12 months, with those reporting the poorest job quality being the most likely to leave. Better pay and benefits are the main motivator to leave, but people are also looking for increased job satisfaction and better work life balance.

The survey sought views of more than 6,000 UK workers and found that one in five workers (20%) say it’s likely they will quit their current role in the next 12 months, compared with 16% in 2021.


Of those who are looking to quit their job:

  • 35% are moving for better pay and benefits elsewhere

  • 27% want to increase job satisfaction

  • 24% are looking for better work-life balance

  • 23% want to do a different type of work

In Scotland last year, 65% of workers considered quitting, as wellbeing took precedence over pay. A Censuswide survey, commissioned by ‘Juno’, among 1,000 'white-collar' staff, found that 58% are suffering from low morale in the workplace, rising to 63% in the 45 to 54 age bracket. This ought to raise alarm bells for business leaders given the often irreplaceable loss of knowledge and experience.

The research also found that across the Scottish economy, 23% of employees stated they have a lack of care for the company they work for (circle back to the need to build trust and loyalty) while 18% said that their mental and physical health had suffered and 17% believing that they work in a toxic environment.


Around 16% of Scottish managers said that salary demands were the primary reason for a potential candidate to choose a different job offer. Scottish workers were also found to be more driven by work-life balance than anywhere else in the UK. This was the primary reason for changing jobs in Scotland, with 35% listing this as their primary motivation to change roles.


In addition, a combined 82% of respondents said that a better work-life balance or workplace culture at a rival company, improved access to benefits and access to wellness tools were the factors driving them to choose an alternative role. This compares to 58% across the wider UK.


In conclusion, when it comes to D, E & I, the numbers don’t lie. And despite a world increasingly placing importance on artificial intelligence, it’s still all about people.


In our experience, organisations that see the most success in diversity, equity and inclusion in the workplace are those who do a lot of preparation work, in collaboration with their people, and go on to develop comprehensive diversity and inclusion strategies and plans which include a variety of different tools, such as targeted recruitment, retention and mentoring programs, diversity training, support systems for diverse hires, and metrics to track progress. Additionally, these organisations have been the ones in which leadership teams were committed to diversity and inclusion, and regularly reviewed their results.


Sprinters

The key is to make a strong, well informed and positive start with buy-in from the top, followed by continued leadership support and commitment. Many leadership teams have well meaning intentions. They believe diversity and inclusion is good for business. Some begin at a fast pace but the baton is often not passed on or dropped due to a lack of continued commitment, support and resources. Don't be the one to drop the baton.


For assistance with planning or meeting your D, E & I leadership objectives, sign up for our bespoke leadership learning sessions, designed in collaboration with you to meet your specific business needs.


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